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UPDATED: It’s official — The leases are signed, and State Farm is expanding into downtown Tacoma

Post by Kathleen Cooper / The News Tribune on April 19, 2013 at 9:30 am |
April 19, 2013 12:43 pm

State Farm has finalized the agreements to open new offices in downtown Tacoma, the company told The News Tribune this morning, making official the exciting news that’s percolated for weeks.

“We have signed the two leases for office space in Tacoma,” company spokesman Brad Hilliard said this morning, referring to the former Russell headquarters at 909 S. A St. and four floors of the Columbia Bank Center at 1301 S. A St.

The company expects to hire 300 employees this summer, Hilliard said, with operations to begin in the fall. The locations have the capacity of 1,100 people, but Hilliard said the company would continue to evaluate its needs in hiring.

The former headquarters of Russell Investments, 909 A St., in Tacoma. Photo by Joe Barrentine/staff photographer
The former headquarters of Russell Investments, 909 A St., in Tacoma. Photo by Joe Barrentine/staff photographer

In an exclusive report April 3, The News Tribune revealed the broad outlines of the company’s plans to open new offices downtown. The day after that report, company officials confirmed the expansion to its employees.

Sources with knowledge of the deal have said the company plans to add about 2,000 jobs to the approximately 1,000 already at its operations center in DuPont. A memo to DuPont employees Friday morning said it planned to continue use of its center there, and Hilliard said reviews of that are ongoing.

Russell Investments, at its peak, employed about 1,100 people downtown.

State Farm’s offices downtown will be an “initial loss reporting” center — a claims center, Hilliard said.

“These are the people when you have a claim — you’re in an accident, or something happens to your home, these are the folks that you speak with and work with,” he said.

He didn’t have details of such employees’ average salary, or the hours of operation for the center.

A job listing for State Farm’s ILRs in other parts of the country indicate it is a 24-hour-a-day operation. Where will all the employees park? Both properties have hundreds of spaces associated with them, and the City of Tacoma controls thousands of off-street spaced downtown as well.

But two people with knowledge of the parking arrangment said the company insisted on arranging its parking so it would cause minimal disturbance with the business activity of downtown retailers and entertainment, such as spots used by patrons of the Broadway Center for the Performing Arts.

State Farm began its search for space in Western Washington at the end of last year. A widely distributed request for space indicated an unnamed tenant, now known to be State Farm, put out a request throughout the region for at least 250,000 square feet or as much as 600,000 square feet of Class A office space ­– the best in the market.

After months of negotiations, the company settled on a move into the former headquarters of Russell Investments and four floors of the Columbia Bank Center, both on A Street in downtown Tacoma. That’s about 300,000 square feet.

It’s unclear if if State Farm’s initial space request was intended simply to be broad, or if the company has further plans. Across the country, the company has gobbled up millions of square feet in the major metropolitan areas of Phoenix, Dallas and Atlanta. The Tacoma deal is the first second-city deal announced as part of its national reorganization, and Hilliard wouldn’t comment on any future plans.

Now that State Farm has plans to occupy the former Russell space, downtown Tacoma is out of large chunks of Class A office space. Ordinarily that would create conditions that could result in new construction, but the Class B vacancy rate is still quite high — about 18 percent according to data from commercial brokerage firm CBRE.

State Farm built its regional headquarters in DuPont in the mid-1990s. It owns its building, which is about 364,000 square feet and has room for about 1,400 employees. About 1,070 people work there, according to 2012 figures from the Tacoma-Pierce County’s Economic Development Board, mostly in claims and underwriting. State Farm has only two other offices in Washington, in Tukwila and Bothell, both of which are small.

The owner of the former Russell headquarters is Ilahie Holdings, a subsidiary of Seattle-based shipping giant Saltchuk. Russell moved to Seattle in 2010 but its lease was in effect through November of this year, making attempts to re-lease the space over the past few years quite a challenge. Ilahie negotiated a buyout of Russell’s lease just in the past few weeks, an indication of how serious the State Farm deal had become.

UPDATE, 11:45 a.m.: Rep. Derek Kilmer sent an emailed statement, reacting to the State Farm news:

“This is great news for folks in Tacoma. This is a really big deal for the people who are going to be able to get great-paying jobs for years to come, for Tacoma’s downtown – including local retailers who are getting a shot in the arm – and for everyone who was involved in making this happen. Successes like these involve hard work from a lot of folks – from the building owners, to the brokers involved, to the City of Tacoma and the Economic Development Board – all of whom are working hard to promote our region and make it a great place to live and work.  I congratulate State Farm on making a great decision. I’m excited to be a partner in promoting policies that create jobs and promote growth.”

In an interview this morning, City of Tacoma economic development director Ricardo Noguero said the State Farm move would continue downtown Tacoma’s revitalization and encourage further development, particularly in housing as the city tries to encourage population growth in areas designed for density.

“The (city) council is interested in creating a 24-7 community,” he said. “If you look at downtown Seattle and other central cities, they’re getting more housing downtown. The desire here is to get more housing along the Foss and the Brewery like we (have) along St. Helens. We’re trying to build upon the urban environment that we have here.”

Noguero said the city did not offer any special incentive package to the company.

Any tax break State Farm could receive is “no different than what’s available to any other employer,” he said, referring to the employee tax credit. “And I’m not sure they’re going to take advantage of that,” he said.

 

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